EU Court rules against Commission in Lufthansa state aid case

The General Court of the EU announced on Wednesday (10 May) that the European Commission was mistaken in permitting Germany to provide state aid to airline Lufthansa during the COVID-19 pandemic, legally annulling the decision.

Airlines suffered a severe setback as a result of bloc-wide travel restrictions aimed at stopping the spread of the COVID virus, leading the German government to bail out the country’s biggest airline Lufthansa with a recapitalisation of €6 billion.

Under EU state aid rules, such a decision must be flagged to the European Commission to assess its legality.

In its statement on the ruling, the General Court, the EU’s second most powerful court, stressed that the Commission “committed several errors” when assessing the aid, particularly regarding possible alternatives to a state bailout.

According to the ruling, the possibility of financing the required capital needs via private markets was not sufficiently assessed by the Commission, which raises questions over the eligibility of Lufthansa for such last-resort state intervention.

The Commission did not properly consider that the company’s aircraft could have been used as collateral for potential credit financing for the required amount, according to the ruling.

Furthermore, the Commission made a mistake by “failing to require a mechanism incentivising Lufthansa to buy back Germany’s shareholding as quickly as possible”, the Court said.

A Lufthansa spokesperson stressed that the company “has already fully repaid the stabilisation measures which have been approved by the European Commission”, and thus the matter would be “fully terminated before today’s court ruling”.

“The revenue from the sale of the shares totalled a little over €1 billion,” the spokesperson added, which is substantially more than the €300 billion paid for the same shares by the German government.

The rest of the aid, which came in the form of a so-called ‘silent participation’, was already repaid by the company in 2021.

‘Triumph for fair competition’

The ruling of the European Court comes after two competitors of Lufthansa, Ryanair and Condor, complained that governments favoured their flagship airlines by granting them generous aid, something that other airlines did not receive.

“The Court’s intervention is a triumph for fair competition and consumers across the EU,” budget Irish airline Ryanair said in a statement.

“Today’s judgments confirm that the Commission must act as a guardian of the level playing field in air transport and cannot sign-off discriminatory state aid under political pressure by national governments,” the statement added.

Asked by EURACTIV about the impacts of the ruling, the European Commission could not yet give any details.

“We will carefully study the judgment and reflect on possible next steps,” a spokesperson said.

The Commission has the option to appeal against the decision.

A spokesperson of the German finance ministry told EURACTIV that it would “take note of the judge’s decision for the time being”, noting that it was not yet legally binding.

[Edited by Sean Goulding Carroll/Nathalie Weatherald]


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